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President, Nuclear Control Institute
China Trade Policy
presented to
Subcommittee on Telecommunications, Trade and Consumer Protection
Committee on Commerce
U.S. House of Representatives
May 14, 1998

Mr. Chairman and members of the Subcommittee, I appreciate your invitation to testify on the status of prospects for U.S.-China trade policy, including enforcement of existing trade-related agreements. My testimony will address nuclear trade with China.

I am Paul Leventhal, president of the Nuclear Control Institute, a nuclear non-proliferation research and advocacy center here in Washington. Before establishing the Institute in 1981, I served on U.S. Senate staff and had responsibility for investigations and legislation leading to "fissioning" of the Atomic Energy Commission into separate regulatory and promotional agencies in 1974, and to enactment of the Nuclear Non-Proliferation Act in 1978.

On March 20, the U.S.-China nuclear-cooperation agreement came fully into force on the basis of a certification by President Clinton that a number of conditions, first established by Congress in 1985 to test China's nuclear non-proliferation commitments, have been met. Some key provisions of the agreement negotiated by the Reagan Administration failed to meet requirements of non-proliferation law. Congress, in legislation enacted in 1985 and 1990, blocked sales of civilian nuclear reactors and fuel to China pursuant to the agreement by requiring the President to certify first that "...China has provided clear and unequivocal assurances to the United States that it is not assisting and will not assist any nonnuclear weapons state, either directly or indirectly, in acquiring nuclear explosive devices or the materials and components for such devices...." "Tiananmen Square Legislation" [Section 902 of Pub. L. No. 101-246], which incorporates the requirements of the Joint Resolution of Approval [Pub. L. No. 99-183] and imposes additional requirements.

The reason Presidents Reagan and Bush and, until recently, President Clinton all had been unable to make the Congressionally required certification of China's non-proliferation credentials is that, since 1985, China has provided Algeria, Iran, Iraq and Pakistan with nuclear assistance applicable to the manufacture of nuclear weapons despite China's repeated assurances that it was not assisting other nations to acquire the bomb. I have appended to my testimony a study documenting this deplorable record of saying one thing and doing another---"China's Non-Proliferation Words vs. China's Nuclear Proliferation Deeds," prepared by Steven Dolley, NCI's research director.

The Clinton Administration, while acknowledging that "China's past record in the area of proliferation has been a source of serious concern," defended the President's certification of China's non-proliferation credentials on the basis of a number of understandings reached with China. These include a new Chinese export-control system that adheres to certain international nuclear-supplier guidelines, as well as specific Chinese commitments that have the effect of limiting the supply of nuclear items to Iran and Pakistan. Testimony of Robert J. Einhorn, Deputy Assistant Secretary of State for Non-Proliferation, to the House International Relations Committee, February 4, 1998.

Yet, there are already deeply troubling indications that China is not living up to its non-proliferation promises. Earlier this year, less than a month after President Clinton submitted his certification of China to Congress, U.S. intelligence agencies found that the state-run Chinese Nuclear Energy Industry Corp., was planning a secret sale to Iran of hundreds of tons of anhydrous hydrogen flouride (AHF), a chemical needed to enrich natural uranium to weapons-grade. The material was to be shipped to Iran's Isfahan Nuclear Research Center, identified by U.S. intelligence as a key installation in the Iranian nuclear weapons program. Barton Gellman and John Pomfret, "U.S. Action Stymied China Sale to Iran," Washington Post, March 13, 1998; Bill Gertz, "China in New Nuclear Sales Effort," Washington Times, March 13, 1998.

U.S. officials were able to talk China out of proceeding with the sale, but this incident was a clear signal that the U.S. nuclear agreement with China might be only as good as the quality of U.S. intelligence. A letter asking President Clinton to terminate implementation of the agreement, sent by 13 members of the House, including the Ranking Minority Member of this Subcommittee and the Chairman of the International Relations Committee, fell upon deaf ears. Letter to President Clinton from Reps. Markey, Gilman et. al., March 19, 1998.

Even more disturbing, less than a month after the Presidential certification of China took effect, Pakistan's first military plutonium production reactor began operating at Khushab, according to a little-noticed Pakistani press report. "Pakistan's Indigenous Nuclear Reactor Starts Up," Islamabad The Nation, April 13, 1998 (Internet version in English). China assisted Pakistan in building this unsafeguarded reactor, but had promised the United States, during talks on activating the U.S.-China nuclear accord, that it would not supply the heavy water needed by Pakistan to start up the reactor.

China, however, has supplied Pakistan with far more heavy water than it needs to operate the safeguarded Kanupp nuclear power reactor, making it possible for Pakistan to divert heavy water from this civilian plant to the Khushab military plant. The Nuclear Control Institute had learned prior to start-up of the Khushab reactor that some U.S. government nuclear experts were skeptical that inspectors from the International Atomic Energy Agency could detect a diversion of heavy water from Kanupp to Khushab.

In a letter to President Clinton and in Congressional testimony, we asked that the U.S. government independently determine how much heavy water Pakistan really needed to run its power plant and thereby ensure against Chinese supply of a diversion-prone surplus, as well as determine whether IAEA safeguards were in fact adequate to detect diversions of heavy water to the military reactor. Letter to President Clinton from Paul Leventhal, President, Nuclear Control Institute, September 4, 1997; testimony of Paul Leventhal to House Committee on International Relations, October 7, 1997. Authoritative industry reports indicate that China is supplying Pakistan with nearly 4 metric tons more heavy water per year than needed for its power reactor, while the Khushab reactor needed 15 tons to start up. (Mark Hibbs, "China May Continue D2O, Reactor Exports to Pakistan after U.S. Certification," NuclearFuel, August 11, 1997.)

The Administration never responded to our request. Following the Pakistani press report of April 13, a senior Administration official confirmed to us that the Khushab reactor indeed had started up, but said that the United States had no evidence that the heavy water in the Khushab reactor was from China. In the absence of such evidence, the United States would not question China on the matter, he said. He speculated that Pakistan had produced most of it indigenously and bought the rest on the open market, although he acknowledged that Pakistan's indigenous heavy-water production was quite small and that the United States had no idea who would supply Pakistan with unsafeguarded heavy water. He also said the United States was checking with the IAEA for any indications of a diversion of Chinese heavy water within Pakistan. Personal communication with senior administration official who asked not to be identified by name.

Mr. Chairman, the start-up of the Khushab reactor is extremely significant. It provides Pakistan with the capacity to produce one to two bombs worth of plutonium a year. Previously, Pakistan's sole source of atom-bomb material was indigenously produced highly enriched uranium. This additional Pakistani nuclear-weapons production capacity may well have figured in India's recent decision to resume nuclear weapons testing---especially because the timing and circumstances of the start-up of the Khushab production reactor strongly suggest that Pakistan diverted Chinese heavy water and that the United States is looking the other way.

Furthermore, if China knowingly oversupplied Pakistan with heavy water, and the heavy water was diverted by Pakistan to produce military plutonium, this, in our view, would constitute "indirect" assistance by China to Pakistan's nuclear weapons program---something President Clinton certified to Congress that China had assured him would not happen.

Given the significance of such a diversion---one that the State Department is reported to have informed Islamabad would result in a "serious degradation of U.S. relations" and "amount to a major international incident," Mark Hibbs, ibid.---I urge the Subcommittee to look further into this matter.

All of this has an eerily familiar ring to it. China did not stop its proliferant exports when it originally signed the nuclear-cooperation agreement with the United States in 1985. Indeed, China had contracted to provide an unsafeguarded plutonium production reactor to Algeria and had begun construction of the then-secret facility during the time China was negotiating and signing the agreement. Vipin Gupta, "Algeria's Nuclear Ambitions," International Defense Review, #4, 1992, pp. 329-330.

One can wish that activation of the U.S.-China nuclear agreement will succeed and contribute to the broader objective of normalizing relations with China. But it is necessary to square Chinese non-proliferation assurances with the CIA's finding of last summer that, in the second half of 1996, "China was the single most important supplier of equipment and technology for weapons of mass destruction" and also the primary nuclear supplier of Iran and Pakistan. CIA Nonproliferation Center, "The Acquisition of Technology Relating to Weapons of Mass Destruction and Advanced Conventional Munitions," 1997 [hereafter "CIA Report"], p. 5. This unclassified report was mandated by Congress in Section 721 of the FY 1997 Intelligence Authorization Act.

The two recent, highly suspicious nuclear matters I have just described suggest that close Congressional scrutiny of the implementation of the U.S.-China nuclear trade agreement is warranted. How best to exercise the Congressional oversight role?

When the President's certification of China was under consideration, the Nuclear Control Institute proposed enactment of a requirement for a waiting period of at least one year from the date of certification before China could receive nuclear goods pursuant to the agreement, and a further requirement for Presidential re-certification of China each time there was an application for a major export or retransfer to China under the agreement.

The intent of our proposal was to permit a "decent interval" during which China's assurances and new nuclear-export controls could be subjected to an initial test of time, and to subject China's future behavior to the standards of the original Presidential certification. But the Administration strongly opposed such a China-specific review and re-certification process, and the President's certification took effect without enactment of legislation, after the formal consideration period of 30 legislative days expired.

At this point, the Nuclear Control Institute would support enactment of a review process that would apply across-the-board to implementation of nuclear-cooperation agreements, not simply to the one with China. One well-established model for such review is found in Executive Branch reporting to Congress on conventional arms sales, as required by the Arms Export Control Act.

As applied to exports made pursuant to nuclear-cooperation agreements, no issuance of a license or other authorization by the Nuclear Regulatory Commission or an Executive Branch agency would be given until at least 30 calendar days after Congress receives a detailed report, specified by statute, on the proposed export and on the non-proliferation record of the recipient country, and the transfer could not take place if, within that 30-day period, Congress enacts a joint resolution prohibiting the proposed export. This system has worked well with regard to conventional arms exports, and it would provide for enhanced Congressional oversight of civilian nuclear exports generally, and of those to China, in particular.

Thank you for your attention.

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